European Union leaders rejected protectionism on Sunday to prevent a new iron curtain dividing the 27-nation bloc into rich and poor halves during the global economic crisis.
At a summit called to bridge differences over how to handle the crisis,leaders made a new commitment to the EUs single market a response to concerns that any protectionist moves to prop up national industries would undermine EU unity.
They did not agree on any regional aid package to the whole of central and eastern Europe after opposition from German Chancellor Angela Merkel. Warning the recession could cause new divisions in Europe two decades after the collapse of communist rule in the east,Hungarian Prime Minister Ferenc Gyurcsany said: “We should not allow a new ‘Iron Curtain’ to … divide Europe into two parts.”
“At the beginning of the 90s we reunified Europe. Now it is another challenge whether we can unify Europe in terms of financing and its economy,” he said. Addressing such concerns,the leaders said the single market should be used as an engine for economic recovery.
“We agreed that as much as possible we should use the single market as a motor for growth,” said Czech Prime Minister Mirek Topolanek,whose former communist country holds the EU presidency till the end of June.
The Union is split between rich countries such as France which want strong action to buoy industry,especially carmakers,and poorer ones — largely in the east — who cannot afford such bail-outs. Germany,the bloc’s biggest economy,has said EU nations must be ready to help each other but has not explained how. It has resisted proposals such as issuing a eurozone bond to raise funds for worse-off members of the currency zone.
A French scheme for 6 billion euros in state loans to its carmakers on the proviso they will not shift production elsewhere has prompted fears that EU governments will rush to protect their own industries at the expenses of others.
The EU Commission has backed the French scheme,noting the loans do not contain any formal conditions on the location of activities,but has said it will monitor events closely.
Swedish Prime Minister Fredrik Reinfeldt said before the summit that Europe had no choice but to cut production capacity,now at 18 million cars since demand was only for 11-12 million. Merkel said she would propose boosting the funds the European Investment Bank,the EU’s lending arm,has available for the car sector for new car technologies.
The EIB has 7 billion euros earmarked for the industry for the first half of this year. Unlike national state aid,EIB loans are available to carmakers in all of the 27-nation bloc.
Hungary called last week for a 180-billion-euro ($228 billion) aid package for central and eastern Europe,whose currencies have taken a battering in the crisis. But Merkel said the former communist countries of central and eastern Europe were not all in the same state.
“I see a very different situation (among eastern countries)… I do not advise going into the debate with massive figures,” Germany’s Merkel said.
Hungary called last week for rules on entering the 16-nation euro zone should be relaxed to help others to enjoy the exchange rate stability it offers.
But Luxembourg Prime Minister Jean-Claude Juncker,who chairs the group of euro zone countries,ruled this out. “I don’t think we can change the accession criteria to the euro overnight. This is not feasible,” Juncker told reporters.